accounting essay

The Beginning Cash Collections Are Added To The Beginning Cash Balance Accounting Essay

Published: 23, March 2015

This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

According to Braun, Tietz and Harrison (2010), the combined cash budget merges the budgeted cash collections and cash payments to project the company's ending cash position. The beginning cash collections are added to the beginning cash balance to find the total cash that is available. The budgeted cash payments are then subtracted to get the ending cash balance before financing and based on this, the company knows whether it needs to borrow money or whether it has to borrow money or it has excess funds to repay or invest.

(Continued C9-72)

Step 1: Combined Cash Budget for four months ending December 31.

Suzanne De Angelo, Weaver Combined Cash Budget For the Quarter Ended December 31

Cotton

Linen

Beginning balance of cash

$ 25

$ 25

Cash collections (based on Exhibit 9-14 & 9-5 from the textbook):

Cotton sales [25 Ã- (0.90 Ã- $20)]

450

Linen sales [15 Ã- (0.90 Ã- $50)]

675

Total cash available

$475

$ 700

De Angelo's cash disbursements:

Accounts payable

$ 74

$ 74

Cost of linen (15 Ã- $18)

270

Purchase of new loom

1,000

Total cash disbursements

74

1,344

Ending cash balance before financing

401

(644)

Financing:

Borrowings

$1,000

Repayments

(200)

Interest payment ($1,000 Ã- 0.18 Ã-

4/12)

(60)

Total effect of financing

740

End cash balance

$401

$ 96

(Continued C9-72)

Step 2a: Budgeted Income Statement for four months ending December 31

According to Braun, Tietz and Harrison (2010), the budgeted income statement helps managers know in advance whether their plans will result in an acceptable level of income. If not, they will have to cut their expenses and increase sales revenues. I used Exhibits 9-5, 9-10 and 9-12 to do this part of the problem.

Suzanne De Angelo, Weaver Budgeted Income Statement For Four Months Ending December 31

Cotton

Linen

Sales revenue

Cotton sales [25 Ã- (0.90 Ã- $20)]

$450

Linen sales [15 Ã- (0.90 Ã- $50)]

$675

Less: Cost of goods sold:

Cotton (25 Ã- $7)

(175)

Linen (15 Ã- $18)

(270)

Less: Operating Expense:

For old loom (4 Ã- $10)

(40)

(40)

For new loom (4 Ã- $20)

Â Â Â Â Â Â Â Â

(80)

Operating income

235

285

Less: Interest expense ($1,000 Ã- 0.18 Ã- 4/12)

Â Â Â Â Â Â Â Â

(60)

Net income

$235

$225

(Continued C9-72)

Step2b: Budgeted Balance Sheet

I have done this using Exhibit 9-17 from Braun, Tietz and Harrison (2010) as a reference.

Suzanne De Angelo, Weaver Budgeted Balance Sheet December 31

Assets

Current Assets

Cotton

Linen

Cash (from combined budget)

$401

$96

Raw materials Inventory

175

Total Current Assets

401

271

Fixed Assets

Loom

500

1500

Less: Accumulated Depreciation

280[$240 + $40 (operating expense in step2a)]

360 [$240 + $40 + $80(operating expense in step2a)]

Total fixed assets

220

1140

Total assets

621

1411

Liabilities

Accounts Payable

800[1000-200]

Total liabilities

800

Owners Equity

621 [386 + 235(net income from step2a)]

611 [386 + 225(net income from step 2a)]

Total liabilities and owners equity

$621

$1,411

Requirement 2

Based on financial considerations only, I believe that by continuing to weave the place mats in cotton using the existing loom, De Angelo will have $401 ad the end cash balance (from step 1 in requirement 1). If the new looms are used, the cash balance on December 31 is only $96.

(Continued C9-72)

Also, from step 2 in requirement the net income difference is $235- $225 = $10. Hence I suggest that De Angelo can continue to weave the place mats in cotton using the existing loom rather than buying new looms and pay debts.

Requirement 3

The non-financial matter that De Angelo must consider is: She might think that with the new loom, she may weave more creative & attractive mats rather than with the old cotton.

Â

Â

Â

Total budgeted DL cost for the company)

$17,000

$30,660

$31,680

$79,340

3. Exercise C9-71, page 541: Suggest performance improvements

DATE: 12/29/10

TO: Jeff Towry, Manager

Cycle World

FROM: Donna Tse

SUBJECT: Cycle World's budgeted income statement.

The driving force of budgeting is our company's long term goals and strategies. The budgeted income statement prepared for the year ending July 31 shows that the company would incur net loss of $2,025. Hence I believe that the company needs to improve its sales revenue to avoid this operating loss.

I suggest that in order to achieve high / increase sales revenues, we need to first increase our sales price and use proper advertisements to promote our product to customers. The salary and commission expense is $46,000. We can reduce this operating expense by reducing the number of employees. Miscellaneous expense is also high and needs to be reduced. Also, rent expenses can be reduced by moving to a locality where we would incur less expense.

$16,475

$23,025F

$6,550

133,600U

$127,050

(Continued C10-76)

Requirement 2:

According to Braun, Tietz and Harrison (2010), managers must know why a variance occurred to pinpoint problems and to identify corrective action. To know why static budget variance occurred, managers separate the static budget variance into two different parts: Sales volume budget and flexible budget variances.

I understand that all favorable variances increase operating income and all unfavorable variances decrease operating income. The sales volume variance is $133,600 for the operating income. This is higher and is not favorable.

As a member of Reel Time's management team, I would like to investigate both the unfavorable sales volume and all flexible budget variances. The rent and the advertising expenses must also be investigated. Care should be taken that there should be proper advertising for the product which would boost its sales.

(Continued C10-76)

Requirement 3

If consumers are postponing purchase until after the introduction of a new format for recordable DVD Players, then I feel that it is important that Reel Time management use proper advertisement campaign to improve sales. The company might do a good job this way by increasing the demand for the product through proper advertisements.

Essay Question

1. C10-78, page 613: Ethical dilemmas relating to standards

The Institute of Management Accountants (IMA) is the professional association of all management accountants. There are many ethical challenges that management accountants face these days. IMA hence developed some principles and standards to help them follow ethical behavior. The companies must maintain professional competence, preserve confidentiality of information, uphold integrity and perform duties with credibility by following certain ethical principles that include honesty, fairness, objectivity & responsibility. The company managers must trust the other parties ethical business practices which acts as a vital component to the company's business decisions.

Issue One

In this case, Willis wants Landers to provide her with the last three years of Sun Coast's standard and actual costs which I believe is a company's confidential information. According to the IMA standards, it is unethical for Landers to provide this information.

(Continued C10-78)

Since Willis firm is a new firm, it is important for Landers to make sure that they maintain the client confidentiality. Also, since Willis is ready to provide Landers with benchmarks for the outdoor furniture industry free of charge, I again believe that it is equally important for Landers to consider the fact that the Willis firm is new and if they will be able to provide proper benchmarks.

However, Landers needs permission from his controller to go ahead with this offer.

Issue Two

In this case, I understand that Landers standard cost decision is very important as they are starting a continuous improvement policy that requires a 10 % reduction in standard costs each year for the next three years.

According to the IMA standards, it is important for Landers to uphold integrity of his company and perform his duties with credibility by following certain ethical principles that include honesty, fairness, objectivity & responsibility. Landers might also discuss about this to his controller to make a wise decision.

Our experts can help you with your essay question

Writing Services

Essay Writing Service

Find out how the very best essay writing service can help you accomplish more and achieve higher marks today.

Assignment Writing Service

From complicated assignments to tricky tasks, our experts can tackle virtually any question thrown at them.

Dissertation Writing Service

A dissertation (also known as a thesis or research project) is probably the most important piece of work for any student! From full dissertations to individual chapters, we’re on hand to support you.

Coursework Writing Service

Our expert qualified writers can help you get your coursework right first time, every time.

Dissertation Proposal Service

The first step to completing a dissertation is to create a proposal that talks about what you wish to do. Our experts can design suitable methodologies - perfect to help you get started with a dissertation.

Report Writing Service

Essay Skeleton Answer Service

If you’re just looking for some help to get started on an essay, our outline service provides you with a perfect essay plan.

Marking & Proofreading Service

Not sure if your work is hitting the mark? Struggling to get feedback from your lecturer? Our premium marking service was created just for you - get the feedback you deserve now.

Exam Revision Service

Exams can be one of the most stressful experiences you’ll ever have! Revision is key, and we’re here to help. With custom created revision notes and exam answers, you’ll never feel underprepared again.

Request Removal

If you are the original writer of this essay and no longer wish to have the essay published on the UK Essays website then please click on the link below to request removal: